(in Canadian dollars except as otherwise noted)
TORONTO, May 11, 2021 /CNW/ - (TSX: IFC)
Highlights
- Net operating income per share up 49% to $2.40 and OROE of 19.0%, driven by strong
underwriting performance and distribution results
- Premiums grew 1% impacted by an additional $75 million of COVID-19 related relief for
personal auto customers
- Combined ratio of 89.3% was strong, with Canada at 88.2% and the U.S. at 96.3%, which
included 7.6 points of weather-related catastrophe losses in the
U.S.
- EPS of $3.51 for the
quarter and BVPS up 20% year-over-year to $62.19, driven by strong operating results
and investment gains
- Integration and transition planning with the RSA team is
progressing well; all financing is secured, and closing is
expected on June 1, 2021
Charles Brindamour, Chief
Executive Officer, said:
"We've had a solid start to the year, providing additional
relief to our customers and delivering a robust operating
performance. Our fundamentals remain strong on both sides of the
border. In 2020, our ROE outperformance versus the industry was 570
basis points, again exceeding our 500-basis point target. We have
made great progress collaborating with the RSA teams as we prepare
for integration and transition following closing. I look forward to
welcoming our new colleagues to the Intact family. We are going to
hit the ground running together to deliver on our strategic and
financial objectives."
Consolidated
Highlights1
|
(in millions of
Canadian dollars except as otherwise noted)
|
Q1-2021
|
Q1-2020
|
Change
|
Direct premiums
written1
|
2,522
|
2,521
|
1%
|
Combined
ratio
|
89.3%
|
94.3%
|
(5.0) pts
|
Underwriting
income
|
297
|
159
|
87%
|
Net investment
income
|
141
|
150
|
(6)%
|
Distribution EBITA
and Other
|
62
|
44
|
41%
|
Net operating
income
|
357
|
243
|
47%
|
Net income
|
514
|
107
|
380%
|
Per share measures
(in dollars)
|
|
|
|
Net operating income
per share (NOIPS)
|
$2.40
|
$1.61
|
49%
|
Earnings per share
(EPS)
|
$3.51
|
$0.66
|
432%
|
Return on equity for
the last 12 months
|
|
|
|
Operating
ROE
|
19.0%
|
14.0%
|
5.0 pts
|
ROE
|
17.6%
|
9.2%
|
8.4 pts
|
Book value per share
(in dollars)
|
62.19
|
51.71
|
20%
|
Total capital
margin2
|
3,008
|
1,485
|
1,523
|
Debt-to-total-capital
ratio
|
22.5%
|
24.1%
|
(1.6) pts
|
_____________________________
|
1 This press release contains
non-IFRS financial measures. Refer to Section 21 – Non-IFRS
financial measures in the Q1-2021 Management's Discussion
and Analysis for further details. DPW change (growth) is presented
in constant currency.
|
2 Aggregate of capital in excess of
company action levels (165% MCT effective April 1, 2020, previously
170% MCT, 200% RBC) in regulated entities plus available cash and
investments in unregulated entities. Refer to Section 16 –
Capital management in the Q1-2021 Management's
Discussion and Analysis for further details.
|
Common Share Dividend
- The Board of Directors approved the quarterly dividend of
$0.83 per share on the Company's
outstanding common shares. The dividends are payable on
June 30, 2021, to shareholders of
record on June 15, 2021.
- With a strong financial position and confidence in earnings
growth, we will continue to protect our people, support our
customers and advance on our strategic objectives. We intend to
increase our dividend this year as we have in the past 15
years.
Industry Outlook
- The Canadian industry combined ratio was 97% and the industry
ROE was above 9% for the full year 2020. We expect firm to hard
market conditions in Canada and
hard market conditions in the U.S. to continue, driven by low
industry underwriting profitability and low investment yields.
- In commercial lines on both sides of the border, hard market
conditions are expected to continue. In personal lines, firm market
conditions are expected in personal property, while in the personal
auto market rates increases are prudently lower in the current
environment.
Insurance Business Performance
|
|
|
|
(in millions of
Canadian dollars except as otherwise noted)
|
Q1-2021
|
Q1-2020
|
Change
|
Direct Premiums
Written3
|
Canada
|
2,125
|
2,125
|
0%
|
U.S.
|
397
|
396
|
6%
|
|
2,522
|
2,521
|
1%
|
Combined
Ratio
|
Canada
|
88.2%
|
93.3%
|
(5.1) pts
|
U.S.
|
96.3%
|
100.1%
|
(3.8) pts
|
|
89.3%
|
94.3%
|
(5.0) pts
|
Underwriting
Income
|
Canada
|
282
|
158
|
124
|
U.S.
|
14
|
(1)
|
15
|
Corporate &
other
|
1
|
2
|
(1)
|
|
297
|
159
|
138
|
_______________________________
|
3 DPW
change (growth) is presented in constant currency.
Refer to Section 5 –U.S. in the Management's
Discussion and Analysis for further details. In the U.S., DPW
change (growth) as reported was 0% for the quarter.
|
- Premium growth of 1% in constant currency reflected
solid topline growth of 6% in the U.S., while growth in
Canada was flat, tempered by an
estimated 3 points from additional relief in personal auto.
- Combined ratio of 89.3% was strong, despite a 4.2 point
impact from earned relief. The combined ratio in Canada of 88.2% improved 5.1 points
year-over-year, reflecting strong performance across all lines. In
the U.S., the combined ratio improved 3.8 points year-over-year to
96.3%.
Lines of Business
P&C Canada
- Personal auto premiums declined by 8% after reflecting 9
points ($75 million) of additional
relief and 2 points due to the B.C. auto exit. The combined ratio
of 93.4% was strong, including 9.3 points of total earned relief in
the quarter. The 1.2 point improvement over last year was driven by
solid underlying performance and healthy favourable prior year
claims development.
- Personal property premiums increased by 6%, driven by
firm market conditions and unit growth. The combined ratio improved
4.4 points year-over-year to a very strong 77.4%, reflecting higher
favourable prior year claims development and lower catastrophe
losses.
- Commercial lines (P&C and auto) premium growth of 5%
reflected hard market conditions and strong new business, tempered
by lower volumes related to the sharing economy in Commercial auto.
The combined ratio of 90.1% was solid, improving 10.6 points
year-over-year driven by our profitability actions, strong
favourable prior year claims development and mild weather
conditions.
- Distribution EBITA and Other grew 41%, driven by
continued solid organic revenue growth, accretive acquisitions and
continuing expense management.
P&C U.S.
- Premiums grew a solid 6% in constant currency to
$397 million in Q1-2021, driven by
hard market conditions and recent MGA acquisitions, tempered by the
impact of the economic slowdown in some lines of business driven by
the COVID-19 crisis.
- Combined ratio of 96.3% included 7.6 points of
catastrophe losses, well above expectations and related to the
severe Texas winter storms. The
underwriting performance was solid and this business is positioned
to run in the low 90s sustainably.
Investments
- Net investment income of $141
million for the quarter declined 6% year-over-year, driven
by lower reinvestment yields combined with a weaker U.S. dollar,
partly offset by the benefit of higher invested assets.
- Net gains excluding FVTPL bonds were $283 million for the quarter largely driven by a
gain of $273 million related to a
venture investment.
Net Income and ROE
- Net operating income of $357
million in Q1-2021, reflected strong growth in underwriting
and distribution performances.
- Earnings per share of $3.51 in Q1-2021 was driven by strong operating
results and investment gains.
- Operating ROE improved 5 points year-over-year to 19.0%
for the 12 months to March 31, 2021
driven by strong underwriting and distribution performances.
Balance Sheet
- The Company ended the quarter in a strong financial position,
with a total capital margin of $3.0
billion, including $850
million in debt and hybrids issued to partly finance the RSA
acquisition. MCT in Canada was
estimated at 224%.
- IFC's book value per share (BVPS) of $62.19 as at March 31,
2021, increased 20% since March 31,
2020, driven by a strong operating performance and
mark-to-market investment gains due to the market rebound since
Q1-2020.
- The debt-to-total capital ratio decreased 1.6 points to
22.5% as at March 31, 2021, compared
to 24.1% as of December 31, 2020.
Included in the debt-to-total capital ratio is $600 million of medium-term notes to fund the RSA
transaction. We expect the debt-to-total-capital ratio to be below
our initial estimate of approximately 26% at closing of the RSA
acquisition and return to 20% within 36 months following
closing.
Preferred Share Dividends
- The Board of Directors also approved a quarterly dividend of
21.225 cents per share on the
Company's Class A Series 1 preferred shares, 20.825 cents per share on the Class A Series 3
preferred shares, 17.03450 cents per
share on the Class A Series 4 preferred shares, 32.5 cents per share on the Class A Series 5
preferred shares, 33.125 cents per
share on the Class A Series 6 preferred shares, 30.625 cents per share on the Class A Series 7
preferred shares and 33.75 cents per
share on the Class A Series 9 preferred shares. The dividends are
payable on June 30, 2021, to
shareholders of record on June 15,
2021.
M&A Update
- The acquisition of RSA is expected to close on June 1, 2021. As of May 6, 2021, all required anti-trust and
regulatory approvals have been received. A court hearing is
scheduled for May 25, 2021 for a
formal approval of the transaction by the High Court of Justice in
England and Wales. Upon approval, the Acquisition is
expected to close on June 1,
2021.
- In March 2021, $250 million of fixed-to-fixed subordinated debt
notes were issued to partly finance the RSA acquisition. The
acquisition financing is now completed.
- The RSA acquisition is expected to generate over 15% internal
rate of return, high single digit NOIPS accretion in the first
year, increasing to upper teens within 36 months, and a 25%
increase in BVPS on closing. Operating ROE is expected to be in the
mid-teens level in the medium term.
Analysts' Estimates
- The average estimate of earnings per share and net
operating income per share for the quarter among the analysts
who follow the Company was $2.02 and
$2.16, respectively.
Management's Discussion and Analysis (MD&A) and
Consolidated Financial Statements
This Press Release, which was approved by the Company's Board of
Directors on the Audit Committee's recommendation, should be read
in conjunction with the Q1-2021 MD&A as well as the Q1-2021
Consolidated Financial Statements, which are available on the
Company's website at www.intactfc.com and later today on SEDAR at
www.sedar.com.
For the definitions of measures and other insurance-related
terms used in this Press Release, please refer to the MD&A and
to the glossary available in the "Investors" section of the
Company's website at www.intactfc.com.
Conference Call Details
Intact Financial Corporation will host a conference call to
review its earnings results tomorrow at 11:00 a.m. ET. To listen to the call via live
audio webcast and to view the Company's Financial Statements,
MD&A, presentation slides, Supplementary financial information
and other information not included in this press release, visit the
Company's website at www.intactfc.com and link to "Investors". The
conference call is also available by dialing 647 427-7450 or 1 888
231-8191 (toll-free in North
America). Please call 10 minutes before the start of the
call. A replay of the call will be available on May 12, 2021 at 2:00 p.m.
ET until midnight on May 19,
2021. To listen to the replay, call 416 849-0833 or 1 855
859-2056 (toll-free in North
America), passcode 5025566. A transcript of the call will
also be made available on Intact Financial Corporation's
website.
About Intact Financial Corporation
Intact Financial Corporation is the largest provider of property
and casualty (P&C) insurance in Canada and a leading provider of specialty
insurance in North America, with
over $12 billion in total annual
premiums. The Company has over 16,000 employees who serve more than
five million personal, business and public sector clients through
offices in Canada and the U.S.
In Canada, Intact distributes
insurance under the Intact Insurance brand through a wide network
of brokers, including its wholly-owned subsidiary BrokerLink, and
directly to consumers through belairdirect. Intact Public Entities,
a Canadian Managing General Agent (MGA), distributes public entity
insurance programs including risk and claims management services in
Canada.
In the U.S., Intact Insurance Specialty Solutions provides a
range of specialty insurance products and services through
independent agencies, regional and national brokers, wholesalers
and managing general agencies. Products are underwritten by the
insurance company subsidiaries of Intact Insurance Group
USA, LLC.
Forward Looking Statements
Certain statements made in this news release are forward-looking
statements. These statements include, without limitation,
statements relating to the outlook for the property and casualty
insurance industry in Canada and
the U.S., the Company's business outlook, the Company's growth
prospects, the impact on the Company of the occurrence of and
response to the coronavirus (COVID-19) pandemic and ensuing events,
and the Company's proposed acquisition of RSA and the completion of
and timing for completion of the RSA acquisition. All such
forward-looking statements are made pursuant to the 'safe harbour'
provisions of applicable Canadian securities laws.
Forward-looking statements, by their very nature, are subject to
inherent risks and uncertainties and are based on several
assumptions, both general and specific, which give rise to the
possibility that actual results or events could differ materially
from our expectations expressed in or implied by such
forward-looking statements as a result of various factors,
including those discussed in the Company's most recently filed
Annual Information Form dated March 31,
2021 and those made in our Q1-2021 Management's Discussion
and Analysis (including in its "Risk Management" in section 20),
our 2020 Annual Management's Discussion and Analysis (sections
28-33), in Notes 10 and 13 of our Consolidated Financial Statements
for the year ended December 31, 2020
and the additional risk factors of the Company related to the
proposed RSA acquisition as described at pages 24-28 of the
Company's Presentation entitled "Building a Leading P&C Insurer
- Acquisition of RSA's Canada and
UK&I operations," dated November 18,
2020. As a result, we cannot guarantee that any
forward-looking statement will materialize and we caution you
against relying on any of these forward-looking statements. Except
as may be required by Canadian securities laws, we do not undertake
any obligation to update or revise any forward-looking statements
contained in this news release, whether as a result of new
information, future events or otherwise. Please read the cautionary
note at the beginning of the MD&A.
SOURCE Intact Financial Corporation